Scotland is not voting on independence next Thursday. But with the SNP leading in the polls, it is interesting to ask what economic cases can be built for or against an independent Scotland.

Indeed, lots of economists are taking to the newspapers and airwaves to offer a view.

Here's mine.

It starts with the basic premise that Scotland has two things that England does not.

The first is a disproportionate level of UK funded public spending. The second is oil, the revenues of which are taken by the UK government.

If Scotland were independent, it could expect to lose the UK funded public spending; but it could expect to gain the oil money. In the short term, that's the fiscal choice Scotland would be making if it decided to leave the UK and go it alone.

As it happens, the choice is a fairly balanced one at the moment. The oil money Westminster takes, more or less pays for the "extra" public spending Scotland enjoys.

I'll give you the exact figures on which I base this claim as I know these things are much argued about and are very fraught.

The oil money in the fiscal year just ending would be worth £8.6 billion to Scotland, assuming that the Nationalists are right in asserting the country would keep 95% of the total UK £9.1 billion oil revenues.

The public spending "bonus" that Scotland was budgeted to enjoy in the 2005/06 year (the latest available) was worth about £1,500 per person. That was the difference between per capita government spending in Scotland and in England. Multiply that up by Scotland's 5.1 million people (and multiply it up by about 6.2% to bring it forward to 2006/07). In total, the public spending bonus on my calculation then comes out at £8.1 billion.

Now, given the uncertainties of this debate, that's about all the data you need to make a short term assessment of Scotland's "viability" as an independent nation. If Scotland had been independent last year, and had stuck to the same spending policies, it would have had a government whose fiscal position was not that different to that of the UK.

A lot of debate has been stirred by this however. You can read about the competing claims in my postscript below. The Scottish Executive claims about Scotland's deficit make it sound unviable; the SNP claims make it sound as though Scotland is in surplus. The truth I think lies in between. On my calculation for last year, I think Scotland would have had a deficit of £3.5 billion, which would have been manageable.

But as I say, the detail you can read below.

However, does all this statistical banter matter?

Probably not much. The short term is not the best horizon over which one should assess Scotland's viability.

The choice to take money out of the North Sea rather than out of the Westminister Parliament would have long term implications.

And one negative implication in particular, is that an independent Scotland would be very dependent on oil.

Oil would be vital to sustaining the current level of Scottish public spending, accounting for a fifth of government revenue, and about the same proportion of national income.

And yet, at some stage, the oil will run out or diminish. Or the price will fall. And then what?

The argument that the oil money can be put into an endowment fund for Scotland's future doesn't add up because the oil money will have already been used to pay nurses and teachers.

But there is an upside to independence. Scotland could make some different decisions to those it’s allowed to make right now.

It could cut defence spending very heavily, because as a small country, it can free ride on the defence of its neighbours. It can cut corporate taxes and attract international companies which would bring extra revenue in. The UK can't do the same, for fear of provoking retaliation from other big countries.

So it's not impossible to envisage a Scotland that would re-invent itself into a high growth dynamic economy.

The decision to go independent then, involves a gamble: that Scotland could re-develop itself better as a separate economy than as part of the UK; and that it could do so before the huge oil economy faded out of its current significance.

It's a gamble because we don't know what will happen to oil, and nor do we know how successful Scotland will be at reinvigorating its economy.

It could go right, as it has for Ireland in recent years. Or it could go wrong, as it did for Ireland in the first few decades of its history.

However, there is one other implication of independence. And this is perhaps the most important, and the least predictable.

Would it move the political centre of gravity in Scotland?

For London-based journalists, it is striking just how far left of England, Scotland's politics lies.

How would independence affect that?

Some Scots think that if only Scotland could free itself of the tyranny of English capitalism it would become more socialist. After all, Scotland's devolved government is restrained by Westminster in its spending, and through the disciplines of the Labour Party in the radicalism of its policies.

But there is a counter-argument. That independence and fiscal autonomy would make Scotland not more socialist, but more like England. When government spending is paid for directly by taxation on Scotland's own middle class, that group may be less inclined to vote for it.

Or to put it brutally, when the oil money ran out, if Scotland had not reinvented its economy, it would have to learn pretty fast how to do so. There would be no security blanket, and the desire for a tax-financed public sector to shore up the economy may diminish.

I'm not sure which way this debate goes, but it is interesting that a number of market-oriented economists - such as John Kay - are beginning to see the merits of independence as a possible "kick up the bum" factor to a Scotland that can be accused of low aspiration compared to its economic potential.

Now, economists are in demand in this election. But they can't give definitive answers to the important questions about Scotland's future. They might be able to pontificate about the short term fiscal consequences, but that's not where the real argument should be.

It's the growth capacity of the nation that matters for its economy. And there's far too much uncertainty surrounding that, for any detailed statistical banter to be very illuminating.

For the Scots the decision to remain or not remain part of the UK, has to involve some leap of faith.

Post Script
The Scottish Executive says the government of an independent Scotland would have an enormous deficit measured at £11.2 billion in 2004/05. The SNP says Scotland would have a modest surplus of £0.61 billion in 2006/07.

Before we do anything, we have to put these claims into the same year, 2006/07.

Using the Executive's method in a rough and ready way on 2006/07 tax revenue figures, I think you can argue their measure of the Scottish deficit would amount to £12.1 billion. It's that which compares to the SNP claim of a surplus of £0.6 billion.

Now, who is right?

Well, first, there's oil.

The Executive assumes Scotland would get no oil revenues. Add in the £8.6 billion of oil revenue to the Executive figures, as I think one should, and most of the difference has gone. The "Executive" deficit shrinks to £3.5 billion.
But secondly, the SNP assumes Scotland would get £1.3 billion more of oil money than I have said, basing its claim on what are now out of date figures for UK oil tax revenues. Update the SNP figures, and their claim of surplus goes into a deficit of £0.7 billion.

Let's not stop there.

The next thing is that the SNP assumes Scotland's share of UK defence spending is a mere 6% of the total, even though Scotland makes up 8.5% of the population. I don't think that makes sense. In all other resepcts, the spending that is not geographically attributable is apportioned on a uniform per capita basis. And that seems the right way to do it - 5 million Scots enjoy the same defence as 5 million English people.

Adjust the spending attributed to Scotland for an 8.5% share of defence spending, and it goes up by £0.75 billion, as does the SNP deficit figure.

Finally, the Executive uses a more sophisticated way of measuring tax revenues raised in Scotland than the SNP. It takes into account that incomes are slightly lower, and hence finds that Scotland's share of total income tax (and some other taxes) a little less than proportional. This makes the deficit attributable to Scotland a little larger.

I prefer the Executive revenue figures, as more work has gone into them. (And an economist I trust who has looked at household income surveys, says he thinks the Executive is more likely to be right on that).

Adjust for that, and you must add another £2.1 billion to the SNP deficit.

With all these reconciliations, the "corrected" SNP measure of the deficit is £3.5 billion. Which matches the "corrected" Executive measure of the deficit of £3.5 billion.

And that's my measure of the "Scottish deficit" last year. Or to put it another way, its about a tenth of the UK government deficit, so not very different to being proportional to the Scottish share of Gordon Brown's UK deficit.

I think that inherent financial independence from Britain for Scotland, Wales, and even Ireland matters less than how European Union and, to a lesser extent, world politics works. Scotland may well do better outside the UK even without oil, because in many decision-making bodies, small countries are given the same weight as the big ones. As a result such countries have a disproportionate influence over resource allocation in Europe and in relations with the rest of the world, which serves them and their leaders well. If this issue is not addressed, Europe is likely to become increasingly fragmented.

Would Scotland really get the oil though? Brown seems so dependent upon it that it would be tantamount to political suicide.

I suspect that even if Salmond got as far as permission of a referendum it would inevitably fail because of the need for political union - Westminster wouldn't allow the break up & so would impose clever conditions upon turnout etc so that it was doomed to failure like the original ballots on devolution in the 70s

Evan
I agree we need to take the big picture view, rather than focussing on specifics, but the question is surely "why wouldn't Wales and Scotland be better off as independent countries?", given the following:

1. Assume that the English are not genetically superior to the Welsh or Scots (but clever welsh people may move to London).

2. Note that there is no relationship whatever between country size (population) and GDP per capita (using data UNDP 2006 Human Development Report)

3. Note that there is a strong relationship between proximity to a nation's capital, and regional income per capita

Thus, there is no right or wrong size for a country, but within a country, income inevitably becomes centralised if politics is centralised. Total GDP is therefore unaffected by splitting countries up, but the distribution of GDP is.

Thus, for any peripheral region, income will tend to be increased by getting independence.

Thus, since Wales and Scotland are peripheral to London, ceteris paribus, they will be richer if they get independence.

Imagine what Iceland would be like if it was still ruled from Copenhagen. Do you really think it would be one of the richest countries in the world? Do you really think that a conventional economic analysis in 1944 would have predicted that Iceland, a country devoid of almost any natural advantage, would outstrip its former colonial power?

Economics can tell us little about changes which are non-marginal, like independence.

An independent Scotland would need to apply for EU membership, France would have to hold a referendum on this and some elements of the new constitution would need incorporating (e.g. voting rights, commissioners etc) implying lots more debate and disagreement and at least one (Irish) referendum. In other words an independent Scotland might be outside the EU for a lengthy period.

"Free loading" is a bit of a pejorative term, as it strikes me. It's fairly obvious that an independent Scotland would not need even a per capita adjusted UK-style military. Instead of launching expensive and useless foreign adventures, we should all be free-loading (as to a certain extent we all already are) off of the US. If they want to assert and project their power, let them pay for it. The economic case for independence is in my view strong. Scotland's infrastructure (e.g. transport, healthcare, education) is way, way ahead of for example Ireland's, even after their recent cavalcade of growth (although it's worth noting that in an enlarged EU we would probably miss out on the development funds that Ireland has enjoyed). Lower corporation tax- as advocated by the SNP - would attract business, and the natural "bounce effect" of self-government could inspire a confidence which is sadly lacking at present. Even with dwindling oil, independence would in my view work economically, although the minimum cost would of course be *any* kind of presence Scotland currently has in international affairs. Ireland's economy is growing at- what- 9% year on year? Ours is growing at 2-2.5%. There has to be a reason for it. What I will say is this- Scotland has deeply-embedded problems (e.g. with relative poverty) which currently are not getting any better. Something has to be done- if not independence, then what?

The Adam Smith Institute in it's report, "Independent Scotland: A Road to Riches" concludes that an independent Scotland would experience economic growth rates of 7% per annum and that average Scottish income would be £6000 higher than in England.

Also the cost of governing an independent Scotland as a % of GDP would smaller than in England.

This is a win-win situation for Scots on the economy and on public finance and shows that the only arguement left is this whole debate is a political one. So Evan your services will no longer be required.

This has been an interesting intervention but one question I would also have would be the impact of joining the Euro. How would the Scots disengage from the UK pound and move to the Euro as the SNP suggests- or what would the impact of developing a Scots pound? Could, at least in the short term, an independent Scotland use the English pound? What effect would this have?

That could be true, however it does assume that an independant Scotland would actually be admitted to the European Union in the first place for which there is no guarantee. Even if it is admitted, the admission process could take years. The EU currently has 27 member states and a population of 675 million people, with several accession countries already queuing up to get in. Scotland at the moment is part of a net contributing country to the EU but it would presumably, based on the calculations above, become a net importer of EU funds for which there maybe some resistance by other countries in the EU. I'm not sure how this would affect England, Wales and Northern Ireland.

I think that a crucial factor in the sustainability of Scotland is whether it can attract the leaders and high-flyers of the next generation of Scots to stay. If these people simply migrate to the South East of England along with most of the English high-flyers, then Scotland will be doomed. Big business investment is all very well for tax revenues, but doesn't do a huge amount to increase the commercial ability of the population, which will become increasingly dependent on the socialist state.

Socialism sadly doesn't attract high-flyers. These people want to be allowed to float to the top, not be forever constrained to upper-mediocrity. If Scotland swings towards socialism, I can see it losing the most important members of its next generation to London.

The people make up the nation, not the oil. Oil will run out and Scotland will have to make sure that the people who generate its wealth are sustainable.

I feel that greater economic autonomy for Scotland would almost certainly benefit England. The line of thought goes like this.

If Scotland were allowed to set its own corporate tax rates these would almost inevitably be lower than the equivalent UK (de facto English) rate. Indeed the net inflow of oil tax revenues for Scotland could be used for the first ten years to subsidise such a move.

Next because Scotland enjoys (Edinburgh's) historic strength in financial services this would attract a significant number of domestic and international businesses northwards - in effect creating an internal GB competitive market for businesses to choose where best to locate. Most interestingly it is likely that the drift north would be most pronounced out of Labour's heartlands - Manchester, Leeds etc etc where much financial services investment has been taking place. Over time this would lead to a tipping point at which UK (English) corporate tax revenues stagnate and UK rates (English) would have to fall to remain competitive and sustain employment.

This would place UK plc in a more competitive position versus "Rest of the World" attracting more inward investment and economic growth. The result? Everybody including England benefits.

The point is Evan, the morning after a positive referendum result the sun will still rise and the birds will still sing. And the doomsayers of the Westminster village will be as relevant as last week's economic report.

I think the article has the wrong title, because as the economic deficit from Independence is little different to the status quo in conglomeration with the UK - the SNP's 'offer' to the people of Scotland would be better labelled a 'false choice'.

As a Labour Party member in Glasgow, I think the Labour campaign gives the SNP political credibility by getting overly hysterical about their supposed plans.

I think we were always better off dismissing them as besides the point to ordinary working people, whilst highlighting their equivocation on the real political/economic issues of poverty, social injustice and inequality.

Why do you think that Scotland's share of, say, defence spending is proportionate to its population? Barracks, air bases and dockyards are located in particular parts of the UK. Research bases, too, are located in particular areas. Defence spending is concentrated on these locations, surely, rather than being spread proportionately.

An equally interesting question to whether it would move the political centre of gravity in Scotland is the extent to which it would also shift it in England.

It's ironic that Labour so frequently accuse the Tories of opportunism. An "opportunist" Tory party would surely be supporting Scottish independence as therein lies a huge electoral advantage for them.

Firstly, Independence would not be done over night and as usual Scotland would probably vote for more devolved power rather then full independence.

Secondly, your comments are based only on Oil revenues and then disproportionate public spending (Barnet formula?). Whatever. Just looking at these two aspects is by no means an ecconomic review or sufficient case for or against. For example, I would strongly ask you to include the revenues generated by TAX on Alcohol beverages exported from the UK and then Scotland alone.

Looking at only two economic issues provides only a column of indesisive tattle.

One important point here is that Scotland could "free ride on the defence of its neighbours". This is my greatest fear about Scottish independence - they will expect to continue to receive help from the UK without contributing to it - which, let's face it, amounts to hypocrisy. For example, they will no longer contribute to British embassies, yet I can't see many Scottish embassies opening. Why bother, when any EU citizen can use any EU embassy if their own is unavailable? As they share a common language, the Scots will be laughing. Scotland could also become a net beneficiary of EU funding (unlike the UK, which is a net contributor - something I have no problem with as we are helping the East to develop; but I'd resent that money going to an independent Scotland). Suddenly, independence seems financially beneficial to the Scots - simply because they would be getting so much for free that they currently pay for. Wouldn't the Scottish people feel ashamed of living on hand-outs?

AM
An independent Scotland would not need to apply for EU membership. The weight of academic opinion lies in the continued membership direction.

But if it did then so would the remaining UK state. As the UK is formed by a union and has the full title of the United Kingdom of Great Britain and Northern Ireland there would be two new states on Scottish independence. Certainly the name of both states would be new, as the UK of GB and NI would cease to exist, as, inter alia, its title would have to change.

It follows that 1 either both states succeed to Eu membership, easily the more practical solution or

2 neither does

In any case the "acquis communautaire" exists in Scotland and has been part and parcel of its legal and commercial structure for 30+ years.

On the French referendum point, even if the French do not amend the referendum article in the constitution or accept the two successor states in the EU point, do you really imagine the French will vote no in such a referendum? Even when the same referendum is held for the other EU successor state?

Is anyone seriously suggesting that Estonia and Bulgaria, the latter struggling even to meet the acquis, are admitted and Scotland would be expelled? I am afraid this is just more of the usual scaremongering premised on the notion that somehow Scotland is not up to self government and that everyone elsewhere shares that view.

Some comments above appear to assume that an Independant Scotland would need to apply for EU membership or may not be "allowed" to join. However any state within the EU that splits into smaller states automatically entitles the resultant countries to imediate membership within the EU.

So an Independant Scotland would also be a Scotland within the EU from the start.

I have heard that Orkney and Shetland would take their own independence from Scotland if Scotland became independent from England. In that case they would take the bulk of the oil revenue with them leaving essentially nothing for Scotland!

Evan - Scotland's woes are self inflicted and will only be resolved when we look after our own country and not delegate that power to an other country.
Brown and McConnell's tactics are to scare and belittle Scotland. Where else in the world does a country's politicians include in their manifesto that the county is financially broke and hence needs to share its resources with another to feed its population?
How is it Iceland, Ireland, Denmark, Sweden and Norway all have brighter economic futures than Scotland? They manage their own affairs in their best interest.
If the Union is so beneficial to Scotland, why have our people the poorest health in Europe>
Scotland's time has come to move on!

No- the EU made it clear not long after the devolution settlement that Scotland (and by default the rump UK) would continue as full EU members. New Labour try to spin otherwise but it would seem fairly straightforward.

For me the argument is pretty straightforward; if Estonia, with a population of 1.3 million and entirely dependent on Russia for energy supplies, can not only be independent but very successful economically (currently one of the fastest growing economies in the EU) then there is absolutely no reason for predicting that Scotland, starting from a much stronger position, would struggle. If Iceland, with a population of less than 300,000, can not only survive but prosper off it's own efforts, again without significant natural resources, then so can Scotland. Presumably new Labour and their ilk would argue that Estonia should have stayed in the USSR because of the "economic benefits", and that Iceland should never have been granted independence from Denmark on the basis of "impracticability".

I like the admirable neutrality of this article, which throws some of the more ludicrous Unionist doom-mongering, associated with the print and broadcast media coverage of this election, into sharp relief.

Actually, that is a good point. Maybe if the UK has to reapply for EU membership, the right (UKIP and/or Tories) will seize the opportunity to opt out. Can you imagine? Scotland leaving the union could in fact bring a lot positives and negatives for England. It's certainly going to make us all think about fiscal policies and monetary conditions and drive us to review the books and our bank accounts. Which is no bad thing.

If an independent Scotland results in a independent England then Labour will never rule in England again and could quickly become the 3rd party in England.
Labour is not just fighting this election to hold onto power in Scotland - it could be fighting for its existence!

There seem to be two elements missing in this discussion. The Irish economy benefits to the tune of some 2.5Bn Euros per annum from the EU which has contributed to the growth in the economy as they have been able to afford to cut corporate tax and invest in education. If such a subsidy was applied to Scotland (assuming we were part of the EU) pro rata this would approximate to £2Bn; a sum substantial enough to allow Scotland to manage its declining oil resources, reduce its public sector, cut corporate tax etc

There are a couple of flaws in the current idea of scottish independence
1) The numbers don't (as Evan) has demonstrated make a compelling case
2) England will not give Scotland a free ride on the oil and Scotland obtaining 95% of it looks like a pipe-dream to me. If it does, will Scotland compensate England for the loss of revenues?
3) Scotland is basically a socialist state attached to a capitalist state (England) that bankrolls their bloated Scottish public sector (as Evan shows), the SNP would claim that this is paid for through Oil.
On independence, how will Scotland become a celtic tiger when the only concievable case for independence, the Kick up bum or Portillo option is that without English subsidy the Scots will have to stop the bloated public sector and have to do some competitive work? Unfortnately all those teachers, doctors, nurses and diversity co-ordinators have to be paid for from the oil and tax revenue so cutting taxes Irish style is not an option without a significant realignment in the now-very-Oil-dependant Scottish economy. The best Scottish brains and businessmen are in England. Also Ireland prospered through cutting taxes subsidised by EU structural funds. Sorry, but the EU money has run out and any that is left is going eastwards
4) The EU may not let Scotland join. The depends on the Spanish or French not vetoing (they wouldn't like the precedence of indenendence in the EU for Catalona or Corsica.

This article is not of your usual standard. Its is full of prejudice masquerading as analysis. what would happen to Scotland, you ask, "when oil runs out or prices fall" as if there is no answer to this question.

Get serious, no-one is panicking about Norway or other oil rich states. Dubai and abu Dhabi are steadily reinventing themselves as financial centres and tourist and entertainment centres with great success. What will happen to London/England when the world's financial institutions set up the main offices in Shanghai and Bombay (as they will one day)?

Independence is a "gamble" you say. But is the current union with England also a gamble? Has the gamble paid off? Do we see that per capita income in Scotland is the same as in Ireland which was dirt poor 40 years ago? or Iceland as someone has pointed out? Has the decision not to join the Euro been good for Scotland?

I won't deal with the point about "freeloading" on defence because someone has already done so.

Scotland's problem is that its best and brighest people leave for the centre of the political and economic gravity which is London. If a new centre of gravity were in Scotland and the country had open borders, free trade, low corporate taxes it could do very well given its educational strengths.

It is assumed that the Political and economic status quo should remain. I don't see it like that.

Would it not be more appropriate if the Scottish people, the "ordinary" people, had control of Taxation?

As things stand, I think the People of Scotland should, have control of their Finances. And that excludes Politicians. Instead of the Politicians throwing a bone for the people to gnaw, let the people who work and pay the wages of the Politicians, have their turn at throwing the "bone". And you Scots, More power to your elbow. Good Luck to you. Regards, ATFlynn.
Have a look at my BBC, Action Network Site-:
www.bbc.co.uk/dna/actionnetwork/G2287
And look at the comment by Mordechai Cohen. It goes a long way to explaining how politics and banking tie you in knots when is suits them.

I think this is an excellent presentation of the economic facts of independence. However, for those who derive a benefit to their self-esteem from being “Scottish” as opposed to something else then the argument doesn’t have much relevance. For the rest of us, the question is why we should take this gamble when there is really little chance of material benefit and some chance of material loss? With the present left-leaning tax and spend policies of all the Scottish political parties, the likely post-cessation economics would be a material (and non-Euro-compliant) deficit followed by a painful and prolonged period of adjustment.

People keep talking about what Gordon Brown would do if Scotland got independance. What Gordon Brown would do is be sent back up to Scotland. As MP for Kirkcaldy and Cowdenbeath he would no longer have any place at Westminster. I don't think many of the Scottish MPs at Westminster would be particularly happy at being chucked out of their position of power.

Why is an independent Scotland suddenly outside the EU? If Scotland becomes independendt, the existing state 'The United Kingdom of Great Britain and Northern Ireland' would cease to exist. If Scotland were required to apply for membership, why would the other bits of the former UK not have to do the same? Greenland had to apply to get OUT of the EEC when it became independent from Denmark. Also, why on earth would the EU be interested in losing all that oil, wind, wave and tidal renewable potential and fishing grounds? Get real.

'Public Spending' is a very slippery concept which excludes all sorts of things. It is very hard to judge the trustworthiness of figures which might exclude aspects of government spending (e.g. on defence) which are not classed as 'public spending' but which might be injected disproportionately into the economy of one region of the UK rather than another. So, the difference between all government spending in Scotland and in the rest of the UK might be less, or it might be more.

I fully support independence for Scotland if that is what the people of Scotland want and, aside from my concerns that the people negotiating independence will be negotiating with Paxman's Scottish Raj, I am more worried about the misrepresentation of the economic situation.

The big oil companies are British companies -- that is they are based in London. Unless the Scottish Government were able to tax what would become English companies, I cannot see how they can appropriate the money you say they can from companies that are operating in international waters.

One analogy that's not been drawn so far is with Quebec Province's long running quest for independence from Canada. French Canadians have long argued for independence and there's been several referenda that have each rejected that notion. Moreover, most Canadians are keen to retain their compatriots in Quebec and support their language and other characteristics. Like Quebec, Scotland makes the complaint that it is less able to control its affairs than it would if independent. The rise and persistence of separtist governments have neither arrested the relative economic decline of Quebec nor the population drift out of the province. When the Federal Government finally invited Quebec to negotiate terms for separation, Quebec voters quickly lost enthusiasm for separation. I suspect that a serious invitation from the UK government for Scottish terms of separation would lead to a collapse of support for a separation government. In short, separtism in Scotland and Quebec are similar: both are all bluff and wind.

According to a report in the Economist a year or so ago, just over half of North sea oil production comes from English territorial waters. This is based on the pre-union boundries.
Can anyone confirm or deny this?

I do love the sheer denial of some Scots. They are presented with a professional opinion from an economist but still they do not listen. My people seem to like acting the victim in all this - under the army of the English Imperial Rule if you will.

I wonder when the people of this country will wake up, smell the coffee, and ditch the belief that everyone bar Salmond is out to get them.

One thing you may need to look at, Evan, is the claim of corporation tax receipts. The SNP's data assumes corporation tax will flow in proportion to the population of Scotland - that is, its 'cut' of corporation tax would be roughly 10% of England's. Corporation tax receipts for 2005/6 for the UK totalled £44Bn.

The SNP's assessment is wildly optimistic since 20% of that £44Bn is generated in the City, and very little of the remainder is in Scotland (a few global finance groups, but most people in work in . I can't find figures to show how much but I can't see how, with the City making up so much of that proportion, the SNP's claim on 10% of corporation tax receipts can be remotely valid.

The number of self-employed workers in Scotland has fallen every year for the last decade. 25% of the workforce works directly for the government.

The Quebecois have given us a preview
of what will happen to Scotland. The
nationalists will follow standard
practice and allow the economy to run
down while bitterly blaming the
national government at every turn.

It would be far better to break off
quickly than to allow Scottish cites
to fade in relative importance as the
nationalists entrench their position
and gradually weaken the country.

We in England should do nothing to
influence Scottish voters. The signal
should be that they are welcome to
stay, but also welcome to quit if
they so wish. There should be a no
protracted, messy divorce, and
certainly no hand wringing south of
the border.

I find the political arguments about Scottish independence to be a bit baffling. If you're going to argue that Scotland shouldn't be governed from London, then why stop there? Why should Dumfries be governed from Edinburgh, for instance?

Speaking as someone from the cultural no-man's land of Northumberland, I find the idea of a national boundary between Scotland and England to be a bit of a joke - an arbitrary, man-made line defined by temporary political trends. I understand all too well how it feels to be governed from the other end of the country, but that whole issue relates to... well, it's like a gradual sense of increasing political alienation, radiating out from London.

My point is... in any democracy, you're inevitably going to develop administrative centres like London that bear no relation no the majority of the country; they evolve naturally out of the free market. If Scotland became independant, it would only be a matter of years before fringe groups - someone mentioned the Shetlands, for example - started campaigning for independence from Edinburgh. To scale it in the other direction, look at the people who blame Brussels for everything and want to pull out of the EU.

Basically what I'm saying is that, instead of withdrawing from UK politics, Scotland should embrace them. Everyone outside of Whitehall is in the same boat - with good reason! - and coming together to solve our problems collectively will do a lot more good than white elephants such as independence or regional autonomy or whatever else.

As originating from a Celtic country, Cornwall, emotionally I'm all in favour of an independent Scotlant. The U.K. is far to centralized and Westminster clings to power like a limpit.

However this is an economic debate and here the future is more undertain than the weather. A bit of realism is in order.

Firstly Malcolm missquotes the Adam Smith Institute report which says IF in idependent Scotland follow the Irish policies as over the last few years, it MIGHT BE EXPECT TO reach a similar growth rate of 7% p.a. 'Copy-Cat' policies rarely have the same results as for the originator. Well known large international companies, already established in Ireland or not going to move to Scotland.

Secondly, as pointed out above, Oil is not going to last for ever, the revenue can only be spent once and in any case is pependent on fickle market forces.

Thirdly, achieveing E.U. membership is a long term and by no means certain process. The negative attitude towards the U.K. for its perceved loyalty to the U.S.A. in lack of commitment to Europe could well brush off against Scotland, unfair as this may be.

I believe there is a middle road which Scotland and other parts of the U.K. should go for and that is the Automonous Regional status as we have here in Spain. Catalunya, with 7 million inhabitants, retains more than 70% of total tax revenue an in return for all local services such as transport, education and transport. Each Region as its own Status agreed with Madrid and approved by passed by the certal parliament and the local assembly, with take into account both local needs an capacity. This system is flexible, works well and can be revise as seens to be necessary, without breaking up the State.

Presumably Scotland would take on a fair share of the current UK national debt - a rough and ready figure of £34 billion based on a figure per head in the UK would seem fair. Servicing this debt would wipe out the EU subsidies Scotland would expect.

The rest of the UK would also hopefully benefit as we would have to contribute less tax money to Europe once our population decreases.

Could the same arguement also be applied to Northern Ireland & Wales (& Cornwall for that matter). Exactly how much better off would us Anglo Saxon's be if the Celts were allowed / encouraged to go and do their own thing? Oh yes, a referendum would be very welcome.

Nice to get a such a cogent and unbiased view on this matter. Most helpful to those of us who are not economists and suspicious of what many polititions say.

One other point that perhaps does not impact on the calculations, but may impact on how Scots might view/vote independence. When, not if, the oil revenues reduce then dissapear, will Scotland as part of the Union continue to get the additional per capita funding from central goverment? If not it might make many Scots think, "well what have we got to lose".

Scotland has one minor advantage for after the oil - it is highly advantageous for alternative energy developments, which could be in demand, and for water - I believe we already supply quite a lot down south.

These could both be leveraged into a fairly substantial revenue stream.

As to the ownership of the fields - I believe international law indicates that the fields lie in Scottish waters - where the borders meet the sea, they are extrapolated parallel to the latitude lines, not in the direction that they were following - now go look on an atlas as to the locations of the oil fields. I believe that there is one small gas field in English waters, on that assumption

Personally, I don't think the sums work, and that a united britain is better, but then, I'm not an economist.

Everywhere and always, large centralised governments - like that of the UK - are inefficient. In the jargon of economics, they facilitate "rent seeking" behaviour which misallocates resources. The associated "deadweight cost" (i.e. the deviation from optimal resource allocation) reduces welfare for all.

Small countries avoid this because they must. A small country simply cannot sustain rent-seeking and will be forced to end it earlier. Is it any wonder that the richest countries in the world are all small countries or robust federations (which effectively create several small countries out of a big one)?

An independent Scotland will probably suffer initially as its rent-seeking economy is restructured, but eventually both it and England will be better off.

One thing which should not be underestimated is the burden of disentangling businesses across national boundaries.

People who were nice, simple one-country businesses, will either have to become trans-national businesses, or just sacrifice a whole sector of their existing market, hoping to claim a market which has been dumped by someone on the other side.

If I have one office in England servicing the UK, I will suddenly find I need to divide my accounting to report to two separate statutory bodies; my IT systems will need to cater for the gradual drift which will occur between legal and financial requirements - differential tax, interest and exchange rates will suddenly need to be catered for. It is likely my existing databases will need to be split in some way.

My operational processes will need to be split to manage two distinct markets. Staff will need to be trained handling in both regions. I will need UK and Scottish legal advice, insurance cover, marketing strategies.

My anti-money laundering processes will need to factor in people operating cross-border scams. How does my credit checking work? How do people set up Direct Debits without incurring international transfer costs?

Logistics for cross-border transport of goods will need to be factored in.

If I am employing in England someone who elects for Scottish citizenship, will I need to change the legal or contractual basis of employment?

If I am a big bank like RBS or HBoS, where do I have my head office, where are my customer servicing centres, what do I need to do to manage my subsidaries, what are my tax implications? How favourably would the remaining UK look on a key competitor country providing large elements of lending and funding for domestic consumer and business activities?

Can Scotland assume it can just base expected growth on undercutting the UK on corporation tax like Eire did. Might they find they have triggered a taxation war they do not have the means to support in the long term?

Clearly the actual answer is that people would muddle through for 5-10 years until the dust settles, with strategic rebranding along the way, and with major upheavals and expense in the interim.

The sea above the oilfields may well be international waters, but the United Nations Convention on Law of the Sea gives each nation with a coastline exclusive rights to exploit minerals for 200 nautical miles from its coast. The continental shelf can extend even further than this, in which case further rights accrue. The oil compamies presently operating in the UK continental shelf do so under licence from the UK government and pay for the privilege based on the value of what they produce. For what it's worth many aren't even English companies. There's simply no doubt that an independent Scottish government would reap this benefit.

As far as I'm concerned as an English taxpayer half a bilion pounds a year for the next 10 years or so would be a small price to pay to repatriate Gordon Brown, John Reid and the funny little one who runs the MOD.I'm sure we would be much better off.
Come to think of it perhaps England should quit the Union.

The UN charter, article 1: "... respect for the principle of equal rights and self-determination of peoples ..." It must be Scotland's decision, and theirs alone, as to whether the remain part of the union.

Some interesting points, but I think you have oversimplified the defence issue. At present, the Scottish economy is strongly linked to defence, since there are many Scottish soldiers (more than 8.5% of the personnel in the Armed Forces) who need to be paid and equipped. Secondly defence companies have historically invested in Scotland for partly political reasons (tax breaks etc for operating in areas of "social deprivation".

An independent Scotland would have to either maintain a high level of defence spending or lose a lot of soldiers and support staff -politically a difficult to do, especially in light of SNP statements that they will maintain Scottish jobs in defence. Also, firms such as BAE Systems/KBR/VT etc may be less willing to invest in shipyards in Scotland, to perform contracts for the English MoD (especially when Lord Drayson has stated that there is "oversupply" in the British Shipyards). The defence industry's refocusing on England (e.g. invest more strongly in Portsmouth and allow Faslane to close for political reasons) would do further damage to a fledgeling Scottish economy.

Finally, why would cutting corporation tax rates work? Consider the rival states offering the same thing i.e the new EU states of west Europe. They will still be cheaper places to operate for labour intensive industries. Also, has anyone considered the impact of an increased Scottish civil service? An independent Scotland will need a host of government departments to undertake roles currently filled by the UK institutions. Has the cost for these been included?

Maybe the intelligent thing would be to give the Scots fiscal independence, with an appropriate share of money from North Sea oil and gas, as it would allow them to reinvent the economy as they saw it fit. If they improved things they would not really have a reason to leave the Union - if they didn't it would suggest that independence wouldn't work.

But more importantly, we need to look at the realities of independence - how would it work? What if island groups like the Shetlands or regions like the Borders strongly rejected independence - would it be fair to insist they had to be part of an independent Scotland? They may decide to declare independence themselves and seek an arrangement with London - certainly a poll some years ago suggested the NE Scottish islands would secede from an independent Scotland. What would happen to Scottish oil money then?

The idea of independence is very romantic, but the devil is in the details. I believe it would be better for us to sit down an renegotiate what we have now so we can work together to (and this sounds so cliched) build a better future, rather than take a risky gamble.

If Scotland becomes an independent country then the UK would not exist. This is the case because the UK was created when Scotland and England ratified the Treaty of Union (1707). The Treaty of Union was an international treaty ratified in both the Scottish and English parliaments, dissolving both these parliaments and creating a single parliament for Scotland and England. If one of these two countries becomes independent then the other will be independent too and there would be no UK.

This is what I think:
Most of whats wrong/bad in the UK today comes from England. England is overcrowded, has higher crime, higher cost of living, more illegal immigrants etc etc the list goes on.

In this respect an independent Scotland could be a good thing, we would have more control for ourselves, however I DREAD to think what would happen to Scotland if it was left to the fools in the Scottish Parliament to run. This is why I am for the continuation of the union.

Furthermore, the oilfields in the north sea are very mature and it is only due to the high price of oil that it is economical to keep up much of the operations there. When the price of oil goes down, revenue will drop and subsequently production will too.

I think the point about the impact of instutional reform on macroeconomics is the most important one. History has shown that it is political and extra-economic factors that determine the locus of economic development activity. Powerful agglomerated economies do not simply spring up because of intrepid entrpreneurs, their are always key political or social events that create the right kind of conditions for a particular type of economic development (or depression).

In Scotland's case the very advent of national insitutions of independence would impact upon the political dominance of London and Southeast on the island of Great Britain. Not only Scotland but northern England, could benefit from Scottish independence. New economies could spring up:

- in servicing the new public institutions and the Scottish state: as Scottish politicians and institutions spend all the financial resources in Scotland, it is bound to create numerous spin-off economies to service their needs, particularly in the hospitality industries, but also in relation to R&D in health, education and other associated government activities.

- as a result of the relocation of Scottish defence institutions. While much has been said about curtailing defence spending one must recognise the impact defence insitutions have had, invigorating and arguably initiating, the development of high tech industries in southern England. Scottish defence insitutions could do the same for Scotland.

- in the renewable energy sector. Similarly if defence spending is to be cut then Scotland could develop new research insitutions pioneering renewable technologies in wave and wind resources. Just as social conservatism in the US gives economic advantages to the UK in pursuing stem sell research and attracting the world's best brains, so climate scepticism in middle England, could allow an independent Scotland to do much the same with renewable energy technology. This could further be encouraged by Scottish dependence on a declining oil supply.

- in other high tech sectors. The greater focus and spending of an independent Scottish government, would give its existing academic institutions a new national prominence, raising their profile and linking their activities to the Scottish state and Scottish-based big business.

In short as intimated the simple calculation of oil vs subsidy does not tell the full story and as the main entry indicates, what decisions a new Scottish government takes will still be key: the autarkic Soviet Scotland envisaged by the likes of Tommy Sheridan and some of the dissaffected members of Labour Party, will simply transform Scotland into an equivilent of Maoist Albania.

Nevertheless, irrespective of the level of protectionism employed by a Scottish government, it should be recognised that public (or public funded) institutions engaged in R&D can play a major role in the economic development of an area, and even with less revenue, an independent Scottish government would be more likely to establish and support these in Scotland, as oppose to in the M4 corridor or South Cambridgeshire.

Finally there is the independence dividend that will be evident across Scotland. People may have noticed that in recent weeks Sunderland's business leaders wrote to Roy Keane thanking him for the magnificant job he was doing with Sunderland football club, and that productivity was up by as much as 30%. This directly relates to shared feeling of success and achievement amongst the local population, as Sunderland have pushed for promotion to the Premiership (obviously keen for another 4-1 whooping by the Geordies).

The depression felt across northern Britain, the 'can't-do' feeling that emanates from areas of industrial decline also relates to a loss of autonomy and ability to control one's future, namely through the removal of community representation (through unions) in major industries, now long since defunct in the UK's industrial heartlands.

An independent Scotland could recreate that sense of control and inspire the Scottish people to achieve for themselves and their nation.

I am English by the way, and am consistantly annoyed by a number of my countrymen banging on about us 'leaving Trot Scotland to ruin itself'. Scotland will make the sensible choices if it gets the chance.

All the debate so far seems to be about whether Scotland can succeed without a huge subsidy from England. If the best argument that the Scots can use to justify the Union is receipt of English money, it does rather beg the question: what benefit does the Union actually bring to England? It is a question that is now being asked more and more south of the border.

What this exchange of views singularly lacks is, good grace. There appear to be many sour grapes aimed at Scotland from south of the border. This is regrettable, I do not understand their motivation or why they loathe Scotland so!
On separation I wish England nothing but good luck and prosperity, sincerely hoping that she and Scotland can be best of allies. A friendship based on equality of nationhood not domination.
Would it not be more productive for these individuals to wish Scotland farewell and all the best for the future?

Chris makes some very interesting points about defence. The SNP has opposed every war Britain has been involved in since the party was founded (including World War II) moans like crazy every time Scottish regiments are deployed where they might get shot at- but still pitches in alongside the regimental associations to "Save our Scottish regiments" despite the fact that Scottish reguments notoriously depend heavily on "Commonwealth recruitment" (i.e. Fijians, Jamaicans etc) to make up their numbers. There's a bit of me which would be rather amused at the spectacle of Westminster telling a post independence Scotland that they of course inherit all the Scottish army units and will have to start paying for the bloated Scottish infantry establishment the moment the independence celebrations are past. Admittedly a lot of the men (and not just the Commonwealth recruits) might well prefer continuing service in a real army to joining a glorified gendarmerie and a lot of the officers would no doubt take the view that their oath of allegiance bound them to Her Majesty Queen Elizabeth rather than to Alec Salmond's haggis republic but there'd still be employment implications.

On the other side of the coin, how would one split the air force and navy? There aren't any kilted ships or squadrons, after all. I can't see the navy being in a mood to be generous given the costs it would incur reorienting its facilities.

It's interesting to see the Northern Isles issue being raised. As a regular visitor to those parts, I can testify that neither Orkney nor Shetland have any great love for rule from Edinburgh. On 18 May you'll see much of the population of Kirkwall in Orkney processing through the streets behind a pipe band- in honour of Norwegian indepedence day. The flags flown on that event are the Union Jack and the St Olaf's Cross; Scottish saltires are rare spectacles in Orkney. How much of this is bit of a game or even a bit of base political blackmail I don't know (if the latter, it's worth noting that it's worked in the past, with Shetland and Orkney having separate Holyrood MSP seats when they share one Westminster MP as a result of fears that one or other of the island groups would vote no to devolution in 1997- and even with that Orkney voted against tax raising powers). It does however add a complicating factor to the situation and not one which the SNP seem to have hauled on board as far as I can see.

On second thoughts, maybe they will need those regiments after all.....

"The UN charter, article 1: "... respect for the principle of equal rights and self-determination of peoples ..." It must be Scotland's decision, and theirs alone, as to whether the remain part of the union.
"

Should we then be campaigning for the rights of the English to self-determination if we no longer wish to be united with Scotland?

once Scotland run out of oil they will then say that UK had stolen its oil for many years and demand compensation to keep the wee frees rolling along.
Long term Scotland ain't viable on its own. Noone is wasting time fighting the lefties: when the oil runs out the enterprising Scots will go abroad as usual.

Exactly how much of the oil is in Scottish waters? Certainly not all of it. The Barnett Formula simply is not good for the English - amazingly they put up with it through blind ignorance! Scotland is heavilly dependant on welfare, their nurses were given a pay rise while English nurses get nothing. I wonder how long they can afford this for. And that is saying nothing of the west lothian question...

Its interesting that since devolution, and the introduction of proportional representation, Scots are waking up to the fact that there is an alternative to voting labour. Voters are free to ask serious questions of Scottish Labour without the risk of Thatcher style Tory Government from Westminster. Independence would further sharpen minds as we will need to stand entirely on our own two feet. As a result i think that Scotland will be forced to grow its enterprise culture, and i would envisage much less left wing policies than many assume.

How terrible most of these nationalists arguments are.Economics doesnt really come into it.
As Mr Salmond said on question Time we want equality with England.
That is impossible.England doesnt have equality with the USA-a country five times bigger-Scotland cannot have "Equality" with England
The SNP thinks Scotland will simply be the same after independence.Wrong .It will be a completely new country.Its financial service industry will suddenly just be part of a small dangerously uncertain country.It will soon decline and disapear -its best people flooding into London which will actualy benefit
Comparisons with Ireland are wrong.Its EU money that supports Ireland plus a certain latent anti British attitude from Catholic America that has produced investment -all of which will go within ten years when the EU cuts off funding
The other Nordic countries are small democratic highly unified nations with cold but healthy climates.Scotland partly depends on a tourist industry dominated by the very rich.This will either decline or become a peculiar embarassment to a socialist Scotland
Independence would trigger calls for independence right across Europe -in France Germany Spain Italy-all liable to be broken up.These EU governments would not look kindly on Scotlands independence
The possibility of conflict between its different parts and classes is very real
One thing might emerge to cause more trouble.As Scotland foundered politicans would look for distractions.One might be to launch a "Unity with Northern Ireland" movement Now that would be interesting!!
One could go on and on....

About time that we have had someone realise, and be willing to publicise, the essential fact in this election (as it is in just about every other election)...voting is a matter of faith, of gut instinct, of conscience even.

People, in the main, don't sit down and work out to the nth degree,the financial implications of every single policy of every single party. Instead, they take a broad look at things and make a value judgement with equates with their gut instinct. For example, does that tax policy broadly equate with what I think is fair, is just etc? Assuming it does, they'll vote for that party.

Indeed, for as something as fundamental as constitutional change, even floating voters know in their hearts which way their instinct lies (the confusion only arises because they don't want to listen to what their instinct is telling them).

And make no mistake - Scottish people vote on the same issues as the rest of the UK: jobs, health, education etc. Poll after poll continues to show that fewer than 25% of the Scottish people genuinely favour an independent Scotland.

As your economic analysis clearly shows, Scotland's financial future is broadly economically neutral when viewed and subsequently compared through either "nationalist" or "unionist" eyes. i.e. Scotland will broadly be in the same position as it is now whether or not it is independent.

Thus economics can't tell us which way to vote; only our conscience can do that.

In short then it's up to us, as Scots, to vote as we have always done, with our conscience and stop waiting for "definitive proof" for or against independence.

Strange how the majority of the posts, against Scottish independence, come from south of the border!

If we, Scots, are such a drain on England, you should be glad to see the back of us.

The poster, No 52, who said that his company would have to go through all sorts of shenanigans, if Scotland were to become independent. Does his company have no offices overseas. Poor man, he works for a company that can only operate within the UK. Come to Scotland, after independence, and we'll show you how to work it.

The Southern Irish can come to the UK, sign on the dole, get social security, go on the housing lists, even vote, and they're a foreign country! Why should there be any complications between an independent Scotland, and England?

As for our oil running out - not according to the Russians. They have developed deep (40,000ft) drilling, and they state that oil isn't a by product of wee sea beasties, dying in the year dot, but is a naturally replenishing product of the earth! Stick that in yer pipe and smoke it.

As for a Scottish army, navy, airforce - what do we need them for, in an independent Scotland - is England going to attack us again? Aside from fishery protection vessels, what do we need in the way of an armed force?

Many of the anti-independence lot write about the subsidies that Scotland receives from England, what subsidies??? Check your facts, it is England that is being subsidised by Scotland - not a very big subsidy, around £2bn, still, that could go a fair way in sorting out the rural hospitals that Blairs' policies have closed down, or, is attempting to close down.

Likewise for the rural post offices, police stations, fire stations, and, as the village of Renton, in Dumbartonshire, could tell you, libraries and community centers!

Sure, Brown, is anti independence, and why not? After all, it's his job, and all the other Scottish free loaders, in my opinion, who infest Westminster.

There's many things that I disagree with, with the SNP. One being not holding a referendum for another four years, if they win this election.

They state that they will bring our troops home from Iraq/Afghanistan - great! But, why do we have to wait three years, until the SNP has built up some political steam - how many UK soldiers will die in those three years, how many will be wounded, and have to be treated by the NHS, instead of a BMH (British Military Hospital)? BMHs that Blair, who sent us to five wars, closed down -nice one Tony.

If the SNP wins this election, in Scotland, let them have the courage to implement the referendum now, and go back to the country in a Scottish general election, if the vote is for an independent Scotland - mind, make sure we've got the independence first.

North Sea oil is not a very reliable source of income to depend on. I just want to point out that companies engaged in drilling activities in the North Sea are already seeking other sources to produce petroleum like the Canadian sand tar pits. Drilling for oil in the North sea costs almost $40 more per barrell compared to the Middle East. I think by seeking independence Scotland would put itself in a very precarious situation, it could share the 7% or so economic growth rate of Ireland if it uses similar policies to attract businesses, but then again businesses don't move overnight and as for its socialist policies which it will most likely stick with will not help either. I Think Independence has more to do with ideology than economics in this case. Economically stick with the U.K and for the Scottish identity I think its well preserved, people around the world do recognize the Scotish identity.

Oil will last at most another 20 years, and that is tops. Scotland has most of Western Europe's wave and wind energy potential and it has something the rest don't have, a people who have invented most things on the planet, .... not just claims to have done it but actually have done it and that won't change despite what 100 whining "scientists" have to say about their grant monies. What will the future be after independence? Englandshire will be crying into its warm beer on its vandalised village greens that they didn't wake up to the fact sooner that THEY were the junior partner in the marriage of convenience, .... and for Scotland it is no longer convenient. Maybe once she has learned her lesson we will let them back in dribs and drabs but the South East, that workshop of the world ... not, can do what it does best, steal money from the rest of England, .... until the rest of England wake up to the fact they subsidise THEM and decide to join us. We'll need a new name as it won't be the "United Kingdom" any longer without the dregs in the South East, ... how about "The Kingdom of Heaven". Just a thought but such musings usually have a way of coming true. Now that is real life.

The more important question (in fact it is ten times more important because of relative population sizes) is would England be better off going it alone?

As someone who lived 12 years in Scotland and now lives in Bath where we have seen our local rail service decimated and our missing coaches turn up on services in both Cardiff and Edinburh, I would say yes.

I find it highly amusing that here we are discussing the economic viability of an independent Scotland but not discussing the economic viability of the UK overall.

Let me remind you for instance that the UK trade deficit is at a record high (deficit in goods of over £80bn), household debt is now well over £1 trillion and Govt borrowing is on the increase again. Inflation and interest rates are on their way up and house prices are of course the most inflationary they've ever been.

In the meantime investment levels in productive capacity remain muted and we're rapidly selling off what little remains of UK industry as fast as we can go.

It appears to me that massive imbalance between financial services and everything else that's developed in the economy is completely unsustainable and strategically naive and dangerous.

Now you can tell me if you can as to why anyone in their right mind would want to remain as part of a Union that is slowly committing economic hari-kari.

all well and good for the Scots to argue for and want their own independance but it's so ill thought through..

do they want their own currency? if not, why not? it would be furiously difficult to start up subsidised infant industries using a Scottish Pound newly strengthened by the economies oil surplus. They might see a 20% appreciation in the currency (look at how Norway tried to devalue in the nineties and ende up revaluing) and how would their exosting industries compete? It doesn't take much a a disrutprion in the currency markets to cause a huge problem with manufacturing - see Italina textiles and Finnish paper manufacturers for more.

doubtless the Scottish answer to all this will be 'we'd like to keep the currency' which is the same as the Scottish answer to everything 'we'd ike to have our cake and eat it'

sadly, those of us living in the real world, outside Scotland, realise you can't do this. Wake up Scotland.

Where is the point at which duties and tax revenues from oil companies to the Exchequer are derived? Is it when the oil is brought ashore in Aberdeen? Is it when it is sold through the pump? Is it when a company declares it financial statement to the City at results time?

These companies are quoted on the London Stock Exchange, have their head offices in London and pay their tax revenues to the UK Exchequer as a result. Will this change if Independence is declared?

Scotland is not guaranteed to see any oil revenues at all, depending on where those duties and taxes become due. If they are due on landing then Scotland will have a right to claim them in Aberdeen/Shetland/Orkney. If due on wholesale then that would take place at the Petroleum Exchange in London. If due on retail then Scotland will make its claim to the retail outlets.

Corporation Tax would still be paid to the UK Exchequer, due to listing and tax residence of the parent company.

This could prove tricky for the Scottish Parliament to exert a claim over.

While I'm here; What is the current sterling value of the block grant from No.11 to Scotland? Can anyone inform me please. Whatever the figure is Scotland will lose the entire sum on Independence. That much is certain.

On a purely nationalistic note, if the Scots leave the union can we get the Welsh dragon abck on the Royal coat of arms?
(yes I'm affraid most inteligent (and economically liberal) Welsh people do move to London, and the same with the Scots, hence the Labour majorities in our respective home nations)
bit of a rant that sorry.
The subject of defence spending is an interesting one. Given that there are quite a number of UK bases north of the border. Arbroath has 45 Commando, faslane has the Boomers, the Raf bases and other sundery Army bases elude me at present. But in the event of separation I would expect these to close, particularly those which are not predominantly staffed with scots (eg, Raf, RN, and RM). This will certainly lead to a loss of tens of thousands of jobs from the scottish ecconomy. given that the RM at arbroath accounts for several thousand service men and also their accompnying families and supporting industries. It's all very complicated, and might as well come down to an arbitrary emotional decision by the Scots, though I would hope that the ex-pats could vote in such a referendum unlike previous similar votes.

I just wanted to say that it is really really refreshing to read a non-biased version of the economic viability of independence. As we can see, Scotland would be fine. It, like any other country, depends on who Scotland votes in after independence and how the deal with the resources that Scotland has.

However, on a slightly different matter. I am really really curious as to why many English post on this board stating that Scotland is a leech on England yet are really against the idea of independence. Come on guys you either love us or hate us. If we do so much harm to your economy and get preferential treatment then why do you not want rid of us? Wouldn't it mean that every English family would be better off? Or is it just the thought that England, after losing an Empire, would lose the "home countries" too? I just don't understand.

Regardless, thanks for the non biased report into the viability of independence, very refreshing, for good and for bad.

come on ..this is politics,..The politcians will all do what is in their OWN best financial interests along with all the big money men ..no one else's. Little jock/english/welsh man at the bottom of the food chain are the ones who will have the hard time adjusting but at least there will be more politicians to blame..and more to pay.. and remember...you can please some of the people some of the time but never all the people all of the time ??

Good article & comments. I think the essence is, that the economics of a separate Scotland are close enough to be workable, and require the details of separation to be established.

The key question is "appetite & ambition" among the population. - One of the biggest factors exposed in this election campaign, is "what kind of a nation do you want to be"?

I have been struck by the sense that there is a widespread desire to be dissociated from the foreign policy mistakes of Westminster Govt. - Virtually.."if we can't have Britain out of Iraq (etc) then perhaps we can at least get ourselves out of Britain?"

Not just foreign policy, but other factors too, which mean that 2 forces are pulling the Union apart; firstly a desire to be nationally distinct, and secondly to be distanced from association with what Britishness now means in the world. - A powerful combination of Aspiration & Desperation, which could change Labour's landscape north of the border.

England would need an independent Scotland to retain sterling as its currency.
If Scotland were to adopt another currency, either the Scottish Pound or the Euro, England would be left with a massive current account deficit as it would have to import almost all of its oil requirement. This sudden change in terms of trade would have many negative impacts (as well as some positive) - sterling would weaken, causing imports to become more expensive, leading to a lower standard of living. England's status as the international investor's destination of choice could also come under threat if exchange rate volatility was to increase.
An independent Scotland's choice of currency could prove to be a very powerful bargaining chip in the event of a break-up.

I'm English and I'd be all in favour of an independent Scotland, providing the majority of Scots voted for it.

In the short term revenue from oil would make it broadly cost neutral. In the longer term it could remove a significant drain from the English economy in terms of regional grants, infrastructure costs and pensions.

Presumably, they would take a share of the UK national debt with them based on population rather than land area. :-)

As an English citizen of the UK, i would actually prefer if Scotland gained independence. I'm sure that the rest of the Union could survive economically, even if Scotland deosn't. For far too long have the Scots been subsidised by the rest of us, government spending only acounts for 34% of GDP in the south of England, but in scotland over 50%. Surley this dependence on the state is part of the cause of Scotland's lact-lustre growth around French levels.

While I haven't had time to read all 84 comments, so far nowhere have I seen reference to the powers granted to the Scottish Parliament by the Scotland Act to raise or lower the standard rate of income tax by up to 3p. This was certainly a past plank in the SNP's manifesto (the 'Penny for Scotland') and it was calculated at that time that each 1p rise would generate £230 m. This, surely, supports more strongly the economic case for full independence and would (I reveal my prejudices) finally free England from the inequities of the Barnett formula and allow the Scots to freely indulge their ideals for a socialist state.

The difference in per capita expenditure is often cited as the way to caculated the loss for Scotland. (i.e. equalise the per capita expenditure)

Surely the correct approach is to consider the difference in projected tax revenue. (i.e. allocate the tax to the countries)

For example, I would imagine that the average income tax paid per Scot is lower than the average income tax per non-Scot. Thus the proportion of income tax revenue that Scotland will keep will be less proportionately than its population. Corporation tax is likely to be a similar story.

Thank you for a balanced and thoughtful assessment. It was also well-informed, except for the assertion that "...it is striking how far left of England, Scotland's politics lie." Can you provide some evidence to support this?

I'm English born but live and work in Scotland. The SNP is the only party committed to Scotland's future. All the other main parties take their orders from England and follow the party line. This has created a dependence culture. The only way to get out of this trap is for Scottish political parties to devolve from Westminster and persue policies to benefit Scotland and not the status quo. In turn this will benefit the economy and prepare the way for independence in the future.
Scotland has everything to gain and England so much to lose if talented Scots are given an economic reason for staying north of the border.

Most instructive Evan...????? Not you nor any of the 95 posts MENTION farming.. its all OIL OIL OIL...

We here in the NE of Scotland grow the BEST barley in the world.. The farm which produces it is 6 miles away from me. We produce the BEST seed potatoes in the world... Just ask the Egyptians where they get their seed.

We produce the BEST cattle semen in the world.. ask the guys in Montana USA where they buy their semen for the huge beef herds of N.America...

Your lack of understanding ,laddie, of the Scottish economy is truly amazing.. high time the Beeb replaced you!

Alex Salmond KNOWS these things.. he LIVES right in the middle of it.. furthermore he has the respect of the people of the NE. It is sheer RUBBISH to say that Scotland cannot survive on its own. Three things need to be done..:

1. Teach the Central Belt folk to eat properly.. 'Nae mair chips'...!

2. Get the renewable energy programme PROPERLY on its feet.. the present govt's record is truly abysmal.. Where did all the grants go Gordon..?
(I know, I am building my OWN wind-turbine and will have it running in a month..!)

3. Get the work-shy 'bludgers' out of the system... (Great Aussie word that!)

Salmond KNOWS how to do these things and we are behind him... Oh yes and STUFF the EU who needs it..? Norway sure doesnt, nor does Switzerland..

Are you lot still gassing about independance?. That's your trouble all talk and no action. Look, if you want independance you could have it tomorrow, who's gonna stop you?. But no you'd rather grumble, whinge and moan. You'd rather post boring comments on here than actually do something for your country. I read them and they just go on and on, making the same old points and not saying anything of any real importance. Anyway, you could have independance just like that if you wanted it but you lot can't be bothered. You'd rather just sit there reading this waffle.

an independent Scotland would have to take its share of the UK national debt with it. Evan's calculations need to include the interest cost of servicing this debt (3-4 billion pounds per year, about half the oil revenues) to be correct.

As a resident of Orkney for the past fifteen years (prior to which I lived in Shetland for five years) I am, of course, in favour of withdrawing from an independent Scotland.
Naturally, we'd be entitled to our share of the North Sea oil revenue which could make us one of the richest small nations in the world.
Pie in the sky? Well, maybe...but no more fanciful than Mr. Salmond and Co. claiming the oil for Scotland!
Oh..and by the way - we would probably purchase a couple of subs from Salmond-smashed Faslane base and have the soon to be defunct Royal Navy throw in a couple of Tridents. Well, we would need to defend our island paradise, our oil fields and fisheries stock somehow..
If one thinks I'm being a tad flippant just take a look at some of the romantic notions of independence being tossed about by the SNP.

"On the French referendum point, even if the French do not amend the referendum article in the constitution or accept the two successor states in the EU point, do you really imagine the French will vote no in such a referendum?"

If I were Scottish I wouldn't be worried about that, partiularly. However, would the French vote to chuck the English out? Well... they did before, remember?

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Ultimately, I don't think Scots will go for it. Something that hasn't been mentioned as far as I've seen is that oil revenues are in decline. What's more, they're only going to keep declining. So even if the oil is right now the same size as the tax subsidy you recieve from England, then in five years you'll still be regretting it.